This study elucidates the spatial structure of traditional houses, and its transformation toward sustainable development of residential environments in old towns that are currently the focus of tourism development initiatives. Hexia old town in Huai’an District, China, was chosen for this study involving a field survey, questionnaire survey, and interviews. Data analysis identified three periods of residential transformation and three patterns of the residential transformation process. In all cases, there was low awareness of building conservation measures and lack of tourism development by the government, which has translated into ongoing residential transformations according to the demands of daily life. However, in the interests of tourism development, some businesses have started making use of vacant residences and traditional homes, and the relative proximity to work and home imply sustainability of residents’ lifestyles under these conditions. An improvement plan for an old town requires a thorough understanding of the circumstances surrounding residential modifications executed by residents, the problems faced in the living environment, as well as efforts to increase the residents’ awareness of the issue of sustainable living in that old town.
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